TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
1.1 Background to the Study
1.2 Statement of the Problem
1.3 Objectives of the Study
1.4 Statement of Research Question
1.5 Statement of Research Hypothesis
1.6 Scope of the Study
1.7 Organisation of the Study
References
CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction
2.2 The Structure of the Nigerian Banking System
2.3 Theories of Fraud
2.4 The Definition of Fraud
2.5 Causes of Bank Fraud
2.6 Types of Fraud and Ways of Defrauding Banks
2.7 Effect of Fraud on Banks
2.8 Measures for Controlling Fraud in Banks
2.9 Role of Branch Management in Fraud Detection and
Control
References
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction
3.2 Re-Statement of Research Questions
3.3 Re-Statement of Research Hypotheses
3.4 Research Design
References
CHAPTER FOUR: DATA REPRESENTATION ANALYSIS AND
INTERPRETATION OF RESULTS
4.1 Introduction
4.2 Testing of Hypotheses
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATIONS
5.1 Summary of Findings
5.2 Conclusion
5.3 Recommendations
Bibliography
Appendix
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Cases of frauds and forgeries in banks have not only
become incessant but have also been on the
increase in recent years. Although frauds and forgeries in banks are global
phenomena, their growth in Nigeria has been astounding. The problem of frauds
and forgeries are endemic and unavoidable in the banking industry, due to a
variety of reasons, for example, the very nature of banking business which
involves human beings (clients and staff) of diverse backgrounds and interests
in a relationship of trust; the convertible (i.e. cash or near-cash) nature of
most bank assets; wide-spread application of automated systems which leave no
finger-print or hand-writing evidence; wide network of branches, some remotely
located, poorly staffed, ill-equipped and without adequate communication
facilities; common social misconceptions e.g. that banks have limitless funds,
or that bank monies are an institutional loot or booty to be plundered by the
able, (Olufidipe, 2004).
Adekanye and Ojigbede (2006), observed that in Nigeria,
bank frauds and forgeries have assumed a frightening scale and sophistication
consequent upon the general economic depression of the last decade and the
continuing travails of the banking sector in the wake of Government's frantic
policy experimentations. In section 7 (pp. 37 - 42) of its 2004 Annual Report
and Statement of Accounts, the NDIC (Nigeria Deposit Insurance Corporation) has
presented an illuminating report on cases of reported frauds and forgeries in
insured banks. However, the unfortunate truth from empirical observation is
that majority of bank frauds are never reported to the police and NDIC) in spite
of the well-known statutory requirement. Some of the frauds actually pass
undetected whilst some are criminally covered
up, especially where no actual or significant losses are sustained. The common
object of such cover-ups is to avoid adverse publicity, protracted police case,
litigation and/or blackmail. Worse still some of the new generation banks have
been known not only to condone but actually commit and promote gross malpractices
(e.g. kite flying and cross-firing) as a matter of deliberate corporate
business strategy.
The Nigerian banking industry has therefore become not
just a battle front with a clear-cut firing line between the banks and the
bandits but a veritable mine-field in which some banks and their top management
staff are in secret league with the enemy. Only the increased alertness and
collaboration of genuine banks together with improved supervisory measures by
the CBN and NDIC will terminate such pirate organizations.
Olufidipe, (2004) warned that banks must wake up to the
concern of elements in their operating environment and serious threats to their
internal security arising from internal factors such as absence of a tough,
unambiguous corporate policy committing top management to pursue the severest
sanctions including prosecution for acts of dishonesty; lack of clear
procedural guidelines or updated Instructions Manual; poor staffing of vital
functions and loss of experienced personnel; low worker morale and employee
frustration; staff dismissed or terminated for fraud being re-engaged in other
financial institutions e.g. Mortgage Banks and Finance Houses from where they
could launch sneak attacks on their erstwhile employers; unplanned acquisition
of new technologies e.g. Computerization. External factors such as societal
degeneracy which promotes the get-rich-quick syndrome and worship of
materialism; exploitable defects in the legal and penal systems.
1.2 Statement of
the Problem
Though the Nigerian banking industry is one of the most
profitable within the economy, higher performance could be attained in terms of
their private returns and obligation to the society. This must be so if the
banking industry is to perform a leading role in reactivating the economy. The
sub-optimal performance of the Nigerian Banking Industry is due to an array of
problems. Of these problems, the issue of fraud in our banks is one of the most
intractable and monumental. The magnitude on the industry has inspired this
research on fraud in banks.
Cases of frauds and
forgeries in banks have not only become incessant but have also been on the
increase in recent years. Although frauds and forgeries in banks are global
phenomena, their growth in Nigeria has been astounding. The 1993 Nigeria
Deposit Insurance Corporation's (NDIC) Annual Report, for instance, presents a
disturbing picture of rising trends of frauds in banks.
From N351.93
million in 1992, the amount involved in frauds in commercial banks alone rose
to N1,377.15 million in 1993 whereas
the Actual/Expected loss rose from N64.8
million to N241.0 million. We are aware
that frauds cut across all sectors of the economy and that the size of an
enterprise usually determines the volume of fraud perpetrated. We are also not
aware of the role which such problems inadequate manpower and manpower
training, poor internal control system, inadequate incentives and unsuitable
legal framework for dealing with offenders, play in the perpetration of frauds,
(Alashi, 2005).
In addition to these, the lack of commitment on the part
of staff and the employment policies of some banks tend to make frauds and
forgeries attractive. Be that as it may, we consider the high rate of frauds in
banks as clearly unacceptable. Something drastic ought to be done to urgently
stem the tide in view of its image implications for the banking industry and
the crisis of confidence which it could engender among bank customers. We
therefore urge executive and top managements of banks to, as a matter of urgency,
to adopt strategies that will block all loopholes that encourage frauds and
forgeries in their organizations.
1.3 Objectives
of the Research
The primary objective of this research is to find
practical means of minimizing the incidence of fraud in our banks. To achieve
this objective the following secondary objectives have been specified
1.
To review existing
literatures, collect and collate information on fraud in banks
2.
To identify the cause(s)
and the various types of fraud perpetrated in banks.
3.
To identify the various
means employed in defrauding banks
4.
To determine the effects
of fraud on the business of banking.
1.4 Statement
of Research Question
The following questions are stated to guide the
researcher in searching for relevant data in proffering solutions to the
research problem.
1.
Why do bank personnel
commit fraud?
2.
How effective are fraud
control system in our banks?
3.
How can the problem of
fraud be controlled in our banks?
4.
Can we ever have
sufficient information to predict when and how fraud will occur?
These question form the problem of this research work and
the need to provide workable answers to them constitutes the justification for
the research.
1.5 Statement
of Research Hypotheses
For the realization of the above objectives, we
hypothesize as follows:
1.
That there is no
relationship between the "size of fraud In a bank branch and the 'size' of
the bank branch.
2.
That the relatively
inexperienced staffs of banks are not more likely to commit fraud.
The 'size' of fraud is defined in two ways; the numbers
of fraud cases and the amount involved.
1.6 Scope of the
study
The study covered the commercial and merchant banks
operating in Nigeria between 2001 and 2008. These banks had a total of 1,485
branches of which 1,071 filed cases on fraud with Central Bank of Nigeria. Out
of the 1,071, 12% or 126 bank branches spread nationwide were selected and
surveyed.
The information used for the analysis covered the
eight-year period between 2001 and 2008. In order to attain the objectives of
this research the scope of the study was defined to embody all relevant aspects
of fraud in banking operations. Information was obtained on the number of fraud
cases perpetrated in each bank; the different types of fraud and the frequency
of each; the amount involved in the various types of fraud; the amount of loss
to banks and to customers; the person involves in fraud; the period of
concealment; the incidence of collusion; the causes of fraud and the level of
effectiveness of fraud preventive measures. The study also focused on areas
relating to staff strength of banks, size of deposits, size of loans and
advances, age of fraudsters, years a of banking experience of fraudsters, the
means of fraud prevention and detection and the punishment meted out to
fraudsters.
1.7 Organization
of the Study.
The research work is
divided into five chapters. Chapter one is the introduction. Chapter two deals
with the review of relevant literature which include the types of fraud and
ways of defrauding banks, causes of bank fraud, effect of fraud on banks and
the measures for controlling fraud in banks. Chapter three discusses the
methodology, the study area, sources of data and method of data collection,
method of analysis, problems encountered and the limitations of study. The
analysis of various cases of frauds filed with the Central Bank of Nigeria in terms
of fraud centre, frequency of fraud, amount involved, methods used by
fraudsters, person involved in fraud and the incidence of collusion and the
result obtain from the testing of postulated hypotheses are presented in
chapter four. While the conclusions and recommendations of the study are
contained in chapter five.
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